RF's Financial News

Sunday, March 30, 2014

What do we do if that ‘light at the end
of the tunnel’ turns out to be the light of an on-coming train?Economically that could be: a war breaking
out over the Ukraine, the final collapse of the global economic system, a
dispute between North and South Korea, or even an economic battle between Japan
and China. To me, something feels like
it’s coming our way fairly quickly. It brings me no pleasure to think
about these things, but you must admit, things (at the global level) are not
going well.The chances of something
substantial taking place are indeed rising.These types of ‘out of the blue’ events are termed ’fat tail’ events.

Do my ‘fat tail’ events include:

-Agenda
21 groups that want total control of the earth? No. They have been around for 60 years and their
advances have been incremental – Trilateral think tanks, Global warming
initiatives, etc.

-Increasing
our daily intake of Socialism? No. When I look at Norway, Sweden, Denmark, New
Zealand, Ireland, and Belgium (potentially the most socialistic countries on
Earth) – the people there live pretty darned well and in many cases better than
we do.

My ‘fat tail’ events do include:

-A hedge
fund that blows up, and results in a derivative implosion – that cascades into
a global financial shutdown,

-A well
placed dirty bomb going off in a major city,

-A
global currency reset,

-A
collapse of our power grid, or

-A
shooting war that escalates into the first small, nuclear exchange.

I think that these are the types of events
that we have a possibility of experiencing in the not too distant future. These events are rather short-term in
duration, and would take only months to repair.For example a recent report showed that just 9 well-placed bombs would
take our power grid down for 2 to 3 months. My question is: How should we prepare
ourselves monetarily?

#1 CASH:Most people suggest having 6 months of cash
on hand to pay your expenses.These
expenses would be: mortgages, rents, car payments, food, and utilities.I would exclude mortgages, rents and car
payments from this amount.If the banks
go down over a cyber attack, or a global crash, no mortgage companies are going
to be knocking at your door demanding payment. The same is true with auto loans.Therefore, I simply want enough cash on hand (a
few thousand dollars) to pay for food, water and utilities.

#2 GOLD & SILVER:Let’s consider the purpose of gold and silver.I'm not looking for an end of civilization
solution, as much as I am a ‘stop-gap’ solution until things are ‘up and
running’ again.Regular U.S. dollars buy
us a few months, but what if the problem is bigger than that.What if the reason our financial system
collapses is because the U.S. dollar went to ‘heck in a hand basket’ and nobody
wants them any more? That is when having
some silver and gold on-hand, makes sense. I would figure on 100 silver, one-ounce coins,
along with 4 ounces of gold in one-tenth ounce coins, and one-quarter ounce
coins.(FYI: one-ounce coins are
fantastic for wealth preservation but impractical for buying fruits and
vegetables from farmers.)

No one wants to think about the
ugliness that’s out there, but in this case – a few ‘ounces’ of (gold and
silver) prevention – are truly worth the cure.

The Market:

Be careful what you wish for.Last Sunday I suggested that the upcoming
week was going to be a sideways chop, and that was pretty much spot on.After 5 trading days where we saw intra-day
moves of 200+ points up and down, we ended the week with the DOW up 13 points
from where it started. That's a lot of
volatility with very little to show for it.

The question of course is "What
now?" As I watch the global train
wreck unfold, I can see some interesting and bizarre developments:

-On
Wednesday, someone made a $200 Million dollar bet that the S&P is going to
head considerably lower. That's a big bet.
What do they know?

-Earlier
in the week, Russia (indirectly) sold $100 Billion in U.S. Treasuries to
Belgium. How can a country with the GDP
the size of Texas afford to purchase $100 Billion of U.S. Treasuries?

-Our FED
(despite telling us that they’re Tapering QE) is still purchasing all of the Treasuries
that no one else wants to buy. Let’s
face it; we're in a world of hurt when our FED lies to us about what they’re
doing.

I think that the entire global
balance of power is shifting. Russia and
China could easily unite as a trading partner – one for its energy and raw
materials, and the other for its work force.A couple questions come to mind:

-Are the
Europeans really going to side with the U.S. when Russia diverts and sells their
natural gas and oil to China instead?

-Are any
of the leading nations (other than Japan) going to buy U.S. Treasuries when
China announces full convertibility of their Yuan later this year?

-What
happens to the value of the U.S. dollar when the oil producing nations decide
that they'll accept Rubles, Yuan, Yen, and Real's and not solely the U.S.
dollar?

What happens to the stock market –
because (after all) that’s what most people care about?The good news is that our FED can maintain
the illusion of prosperity for a long time.Honestly, our government has proven that they cannot create jobs or housing
demand, but they can push the stock market higher. The issue isn’t their
desire, but rests solely on their ability.The FED can print $20 Billion a day (that they wouldn’t record), and
hand it to select accounts to simply buy stocks. Who would know? The FED just can’t let it be so ‘in your face’
that even the average J. Q. Public gets wind of what they’re doing.

I think the FED will push our
markets higher for the next two months. I
think by June, we will hear more deals concerning a Russia – China alliance.And it’s then in June when we can see the
markets finally roll over. Between now
and then, I see choppy trading and at least one more attempt to break through
to the all-time highs.

On Monday we have the last day of
the quarter, and on Tuesday we have a new month and quarter.These are historically stronger market times
as pension funds, insurance funds, and payroll deposits flood into the fund
managers – and they (in turn) put those funds to work. Therefore, next week I would expect to see a
rising market. After that, we will be
running into earnings season and things will become choppy again.

Many of you have asked about Gold
and silver, and with everything going on globally – Why aren’t they rising like
crazy?The answer is simple: Because the
FED doesn’t want them to rise. Remember;
don’t use gold and silver for trading.Use gold and silver as vehicles to protect some of your wealth. I have never purchased gold or silver with the
intent of seeing it increase $10 and sell it for a profit. Gold and silver are designed to be a ‘long-haul’
defense against inflation, and safety that they provide in the event of a
horrible situation. Did you see the
news?Food prices have risen 19% in 2014
– that’s 19% in 3 months!

Is gold trading where it should be? No. Is
silver trading where it should be? No. They are the two most manipulated commodities
on earth, but that won’t last forever.Don't
let the short term chop drive you crazy. Don't trade the metals - accumulate them.

Tips:

There is an interesting event brewing with MannKind
Pharmaceuticals (MNKD) – a company who’s owner has put in $1B of his own money
– on a new delivery / medication to help control diabetes.They go before the FDA advance committee on
Tuesday (April 1st) asking for their blessing.The FDA ruling will then come around the
middle of the month.Financially, this
presents an extremely interesting opportunity:

Expressed
thoughts proffered within the BARRONS REPORT, a Private and free weekly
economic newsletter, are those of noted entrepreneur, professor and author, R.F.
Culbertson, contributing sources and those he interviews. You can learn more and get your free
subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please
write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If
you'd like to view RF's actual stock trades - and see more of his thoughts -
please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

If
you'd like to see RF in action - teaching people about investing - please feel
free to view the TED talk that he gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

To
unsubscribe please refer to the bottom of the email.

Views
expressed are provided for information purposes only and should not be
construed in any way as an offer, an endorsement, or inducement to invest and
is not in any way a testimony of, or associated with Mr. Culbertson's other
firms or associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is not indicative of
future performance. Please make sure to review important disclosures at the end
of each article.

Note:
Joining BARRONS REPORT is not an offering for any investment. It represents
only the opinions of RF Culbertson and Associates.

PAST
RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS
THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.

Alternative
investment performance can be volatile. An investor could lose all or a
substantial amount of his or her investment. Often, alternative investment fund
and account managers have total trading authority over their funds or accounts;
the use of a single advisor applying generally similar trading programs could
mean lack of diversification and, consequently, higher risk. There is often no
secondary market for an investor's interest in alternative investments, and
none is expected to develop.

All
material presented herein is believed to be reliable but we cannot attest to
its accuracy. Opinions expressed in these reports may change without prior
notice. Culbertson and/or the staff may or may not have investments in any
funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

Sunday, March 23, 2014

On Monday, the Ukraine held their
referendum vote, and the majority voted to be a Russian Federation satellite. That prompted Obama to place some sanctions on
several Russian officials.The market then
proceeded to gain 200 points just because these were not really ‘sweeping’ or
serious sanctions. I then turned on CNBC
and found out that the market was up because we were probably looking at a 5% U.S.
GDP increase, and our economy was much stronger than the winter numbers had suggested.For years our economy has been mired in a
recession, and we’ve had to ‘cook the books’ in order to get anywhere close to
a 2% GDP increase. But I wondered:Why isn’t anyone talking about how we
actually could see 5% GDP growth?You
see, in mid to late 2013, the Bureau
of Economic Analysis (BEA) announced a change in how they will calculate Gross
Domestic Product (GDP) going forward.They
modified how money spent on research and development (R&D), and how money
spent on the production of ‘intangible assets’ like movies, music, and
television will be accounted for within the GDP calculation. The new methodology declares these
expenditures to be ‘investments’ and immediately allows them to increase GDP by
(in most economists estimates) approximately 3%. This ‘cooking of the books’ will lead to the perception
of faster growth.

In the
past, business spending on R&D (a portion of which comes in the form of
salaries) has traditionally been considered an expense that does not explicitly
add to GDP. However, that all changes
with the new methodology.Also the cost
of producing television shows, movies, and music will also count as investments
that add directly to GDP. Thirdly, under
the new system, government pension additions to GDP will be calculated not from
actual contributions (as in the past), but from what our government has
promised. For example: under the old
system, if a state had a $10,000 pension obligation but only contributed
$1,000, only the $1,000 would be added to GDP. Under the new system the entire $10,000 would
be counted. So now a government can ‘magically’
grow the economy simply by making promises they cannot keep.Talk about ‘cooking the books’ – best stir
the pot because the sauce is thickening.

Factually – this week:

-Housing
sales and consumer sentiment declined 6%,

-Mortgage
applications fell to 20-year lows, and ‘first time home buyers’ fell to 10-year
lows,

-Auto
sales are declining as manufacturers are pushing cars to dealerships that they
don't want,

-With
the resurgence of the automobile ‘sales at all cost’ philosophy – over 60% of
auto purchases involve ‘sub-prime loans’,

-China started
to ‘crack down’ on credit due to a Chinese Real Estate developer that defaulted
on a $3.5B note,

-Poland
transferred private pension $’s into their own general fund in order to reduce
their debt,

-Italy’s
largest bank defaulted on half-a-billion tier one bonds,

-Spain’s
unemployment rate hit 56%, and

-Corporate
‘Insiders’ sold 69 TIMES more stock than they purchased. It’s the fastest ‘Insider’ sales rate in
history.

Let me review that last
statistic.Last week corporate ‘Insiders’
BOUGHT $37.8 Million worth of their own company’s stock, but SOLD $2.6 Billion
worth.They sold 69 TIMES more of their
own company’s stock than they bought.This has been going on for months.Corporations (with borrowed funds) are buying back their own company
stock, thereby pushing the stock price higher.When the stock prices are this high, these same ‘Insiders’ are selling
their own holdings in the company.Now,
if the guys that are running the companies don’t want their own stock, why
should we?

Unfortunately,
you can only ‘cook the books’ for so long, until someone asks: “Is it soup
yet?”Honestly, I think we’re close to
it all boiling over.

This rattled the markets. The ONLY reason our markets are at these
levels is because the Fed is feeding our banks billions to buy assets and
stocks. But honestly, that's small
potatoes. The Fed has changed its M.O.
(modus operandi).Their M.O. has always been
to flood the system with money, not to worry about inflation, and do whatever it
takes to ‘save’ things. The Fed now
appears to be trying to ‘prop-up’ the U.S. dollar, while allowing the economy
to fade. Something major has changed in
the Fed’s agenda.

If the Fed is going to
remove their portion of the punch bowl, then the only ‘free money’ remaining is
in the Yen ‘carry-trade’.Without going
into the details of Yen ‘carry-trade’, simply watch the FXY (an ETF that tracks
the value of the Yen).If the FXY
increases, it means that the ‘carry trade’ amount is going down, thereby
reducing the only remaining supply of free money, and correspondingly reducing
the value of stocks in general and the S&P index in specific. Therefore,
if the FXY were to suddenly jump higher, it could create a ‘short covering
rally’, and cause a lot of the mutual funds and ETF’s that shorted the yen to
scramble and cover – causing the ‘carry trade’ to virtually end.

Previously, I was in the camp that thought that the Fed would
reverse its QE reduction program. I also
thought that they might launch a totally new program, designed to push billions
into the system. But something
feels different this time around. I'm getting NO hints at all that the Fed is
willing to slow the tapering, reverse it, or even replace it.I tend to think that many on Wall
Street still believe that this is all show by the Fed, and at the first
sign of real panic the Fed will rush back in and save us.But that flies in the face of the fact that the
Fed started this taper in the face of weakness.

Take Friday’s market behavior for example.On Friday things were going along swimmingly
with the DOW up 125 points until the Federal Reserve participants Mr. Fisher and
Mr. Bullard reinforced Ms. Yellen’s claims about tapering to zero by October
2014.They then tried to define a time
line when they would actually increase interest rates. Immediately the market’s thinking changed, and
the DOW plunged from being positive by 125 points to being negative by 30.

This is a very confusing time. Our #1 marketplace – housing – is not in good
shape.First time home buyers are
completely shut out, because their $1 TRILLION in student loan obligations are
preventing them from taking on a home mortgage.Therefore, homes in the $90k to $250k price-range are NOT selling. The expensive properties are selling due to
the 5-year rising stock market and the corresponding wealth effect.But the ‘first time home buyer’ has always
been the driver of this sector, and without their participation any housing
rally is unsustainable.With this as a
backdrop, how can the Fed be telling us that interest rates will rise after October
2014? If people can't buy a home now,
how can they ever afford one if the interest rates increase? Something quite
odd is going on.

The market (after putting in a new intra-day high on the S&P
Friday morning) faded back and ended the day slightly red. Any time a market is trying to exceed an upper
resistance, it takes a lot of effort to move past. Usually it takes a few
attempts in order to succeed. Unfortunately, now the markets have to
question whether the Fed is really going to ‘have their backs’ and rush in with
more funds when things get extended. Thus far, the Fed is saying ‘No’ –
leaving only the Yen ‘carry-trade’ to take us to glory.

The market feels tired. For
example, on Thursday – the day the market recovered all of Wednesday’s losses –
more stocks declined than advanced. The
rally is becoming narrower, and you can see that it’s struggling. However, we've been in this exact position a
dozen times in the recent past and somehow the market just finds the will (and
the money) to push forward. You almost
expect it now, and that’s a very dangerous thought. I feel (going
forward) that we're going to see some sideways chop as the market tries to
muster the resources to break through the highs. I could easily see a week of up and down -
tighter range movement – with a bias toward the downside.I feel that there is more downside pressure
on this market, than there is upside ability.

Tips:

As ‘Insiders’ continue to sell (including FEYE),
this week I was stopped out of FEYE for a tidy profit.

Last week, I received some questions via e-mail
asking me to further detail my DUST / NUGT trading plan.I would be glad to. NUGT and DUST are leveraged ETF’s that focus
on the precious metals (gold and silver) mining space.The ETF’s are designed to mirror each other’s
actions – meaning as one goes up the other goes down virtually the same amount.Let’s assume you have $100,000 to invest, and
based upon Friday’s prices near the end of the day – here’s how I would
construct the trade:

-DUST was selling
for $21.10 per share.

-I would purchase
1,900 shares of DUST for $40,090.

-The standard
deviation (expected move) in DUST for the coming week is $2.16.

-Therefore, the
highest the ETF is expected to move is ($21.10 + $2.16) $23.26.

-Rounding up (to
give ourselves a little cushion), the $23.50 calls are selling for $0.35 each.

Expressed
thoughts proffered within the BARRONS REPORT, a Private and free weekly
economic newsletter, are those of noted entrepreneur, professor and author, R.F.
Culbertson, contributing sources and those he interviews. You can learn more and get your free
subscription by visiting: <http://rfcfinancialnews.blogspot.com> .

Please
write to Mr. Culbertson at: <rfc@culbertsons.com> to inform him of any
reproductions, including when and where copy will be reproduced. You may use in
complete form or, if quoting in brief, reference <rfcfinancialnews.blogspot.com>.

If
you'd like to view RF's actual stock trades - and see more of his thoughts -
please feel free to sign up as a Twitter follower - "taylorpamm" is the handle.

If
you'd like to see RF in action - teaching people about investing - please feel
free to view the TED talk that he gave on Fearless Investing: http://www.youtube.com/watch?v=K2Z9I_6ciH0

To
unsubscribe please refer to the bottom of the email.

Views
expressed are provided for information purposes only and should not be
construed in any way as an offer, an endorsement, or inducement to invest and
is not in any way a testimony of, or associated with Mr. Culbertson's other
firms or associations. Mr.
Culbertson and related parties are not registered and licensed brokers. This message may contain information
that is confidential or privileged and is intended only for the individual or
entity named above and does not constitute an offer for or advice about any
alternative investment product. Such advice can only be made when accompanied
by a prospectus or similar offering document. Past performance is not indicative of
future performance. Please make sure to review important disclosures at the end
of each article.

Note:
Joining BARRONS REPORT is not an offering for any investment. It represents
only the opinions of RF Culbertson and Associates.

PAST
RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS. THERE IS RISK OF LOSS AS WELL AS
THE OPPORTUNITY FOR GAIN WHEN INVESTING IN MANAGED FUNDS. WHEN CONSIDERING
ALTERNATIVE INVESTMENTS (INCLUDING HEDGE FUNDS) AN INVESTOR SHOULD CONSIDER
VARIOUS RISKS INCLUDING THE FACT THAT SOME PRODUCTS AND OTHER SPECULATIVE
INVESTMENT PRACTICES MAY INCREASE RISK OF INVESTMENT LOSS; MAY NOT BE SUBJECT
TO THE SAME REGULATORY REQUIREMENTS AS MUTUAL FUNDS, OFTEN CHARGE HIGH FEES,
AND IN MANY CASES THE UNDERLYING INVESTMENTS ARE NOT TRANSPARENT AND ARE KNOWN
ONLY TO THE INVESTMENT MANAGER.

Alternative
investment performance can be volatile. An investor could lose all or a
substantial amount of his or her investment. Often, alternative investment fund
and account managers have total trading authority over their funds or accounts;
the use of a single advisor applying generally similar trading programs could
mean lack of diversification and, consequently, higher risk. There is often no
secondary market for an investor's interest in alternative investments, and
none is expected to develop.

All
material presented herein is believed to be reliable but we cannot attest to
its accuracy. Opinions expressed in these reports may change without prior
notice. Culbertson and/or the staff may or may not have investments in any
funds cited above.

Remember the Blog: <http://rfcfinancialnews.blogspot.com/>
Until next week – be safe.

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